By Owen Batchelor, Portfolio Manager at Amova Asset Management
The May reporting season is one of the quieter ones on the calendar, with around 15 companies reporting and representing roughly 35% of the NZX50 by market cap. Alongside the usual results, a run of material announcements earlier in the month drove some sharp share price moves, and the backdrop of the Iran conflict, oil prices, and tariff uncertainty hung over almost every result. Yet when the dust settled, the underlying results were reassuringly steady: no major blow-ups, downside share price reactions generally contained to a couple of percent, and several genuinely bright spots.
Two of the more technology-oriented names set the tone of the season. Gentrack downgraded its earnings guidance, with revenue coming in well short of expectations and profitability falling away sharply. As our research analyst Tim O'Loan noted, this looked far more like a timing and execution issue than anything structural in demand, driven by delays to utilities project revenue rather than any loss of underlying momentum.
Tim said, “The downgrade and the result both highlight timing risk on the deal pipeline, and the market will want evidence that those delayed deals actually close. Commentary around the pipeline is no longer sufficient – execution and delivery are now what matter.”
Vista Group had the brighter story, announcing its largest cloud deal to date as Mexico's biggest cinema chain migrated 500 sites onto its higher-tier platform called Operational Excellence. This followed another recent deal with Cineworld UK. The run of deals struck us as a strong endorsement of the company's market proposition, and investors agreed, sending the stock sharply higher.
A2 Milk provided the month’s most uncomfortable headline, recalling three batches of US infant formula over the same contamination concern that prompted recalls by Nestlé and Danone earlier this year. Importantly, no illnesses were reported and the issue appears isolated to the US-labelled product, which accounts for less than 0.1% of revenue. The market’s nervousness centres on any read-across to the all-important China-label business.
The standout corporate development came from Infratil. Its CDC data centre business signed a 555-megawatt contract with an undisclosed US-based hyperscaler. The contract is the largest Australia has seen and roughly two-and-a-half times CDC's current capacity.
As portfolio manager Michael De Cesare observed, the result itself landed at the top end of guidance and reflected strong execution of a strategy that balances defensive cash generators with high-conviction growth through CDC and Longroad Energy. The contract takes CDC's contracted capacity to around one gigawatt and underpins a material lift in medium-term earnings.
Longroad, meanwhile, is advancing a compelling “power + compute” thesis, drawing on its existing experience supplying renewable energy to a Meta data centre in Texas and exploring whether renewable electrons can be packaged with land and data centre shells. Infratil has been a key overweight for our funds for more than a decade, and our positive medium-term to long-term view is unchanged.
Mainfreight was another result worth noting. The numbers themselves came in broadly in line, but the outlook statement was the real highlight, with the company pointing to improving trading conditions through April and May, driving a better-than-expected start to FY27. The market responded positively, with the stock up 7% on the day.
The most anticipated result was Fisher & Paykel Healthcare, the market's largest stock, and there was more uncertainty than usual heading into the result given the US-Iran conflict's effect on input and freight costs and the tariff question hanging over its biggest export market, the US. Both the result and guidance came in line with expectations. The hospital business performance was particularly impressive against a weak US flu season, pointing to rising clinical adoption of the company's products, exactly the kind of structural signal we like to see. Tariffs remain the key near-term risk, but the business's track record speaks for itself.
The retirement sector offered some of the season's most encouraging reading. Ryman Healthcare delivered a solid step forward, with revenue growth healthy, operating earnings nearly doubling, and the balance sheet reset clearly progressing through lower debt and more disciplined capital spending. Importantly, as Tim O’Loan noted, the recovery is being driven by operating performance and cash flow rather than asset revaluations, a reminder that this is an aged-care business benefiting from structural tailwinds, not simply a property play.
Oceania Healthcare echoed those themes, with sales volumes up 16% in a subdued housing market and care profitability improving quickly. Across both, resale margins remain under pressure, a clear reflection of the softer housing backdrop, and execution on resales and cash flow will be crucial from here. We see compelling value in the sector.
May is always property-heavy, and five REITs have reported. Kiwi Property's result was broadly in line, with good leasing progress, solid re-leasing spreads, and, pleasingly, guidance to a dividend increase a touch ahead of expectations. The company has also slightly refined its strategy to focus more on prime retail and to add mixed-use assets only where they make economic sense, a sensible move in our view.
More broadly, while dividend growth across the sector has been hard to come by, only Goodman and Kiwi Property guided to growth next year. The yields on offer are genuinely attractive, sitting well above term deposits and near the widest spread in a decade.
Looking at the month as a whole, the NZX 50 delivered a strong return of 2.7% in May, making it the fourth-best May in the past 15 years. That was driven by some of the larger names performing very well, with Infratil up 26% over the month and Mainfreight rising 10%. Pleasingly, our equity portfolios at Amova also performed well and outperformed the NZX 50, with Infratil, Vista Group, and Fisher & Paykel Healthcare among the key contributors.
Disclaimer:
This information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be relied on as financial advice. Before making any investment decision, you should seek professional advice suited to your personal circumstances. Past returns are no indication of future performance.